How Best to (Re)Enter The Stock Market?
Sad but true. I have been sitting on the investment sidelines since the Great Recession. I found it much easier to raise 2 little ones and bring home the bacon than figure out how to invest.
I want to get (back) on track and start investing, without overly exposing myself to the inevitable market correction many people anticipate, including me.
Starting with $130K in cash in a SEP IRA, how would you go about investing it?
Hi Jenna. You're looking towards the future and ready to move forward - that's great! I also know it's not easy.
Before diving right in, it would be good to reflect on how you felt during the Great Recession, what caused you to get on the sidelines, and how you think you'll feel when "the inevitable market correction" happens. To that end, I recommend reading Carl Richard's Behavior Gap. It's a very easy read filled with helpful and impactful drawings (he writes for The New York Times and is known as "The Sharpie Guy" - breaking down complex subjects into simple sharpie drawings on a napkin).
When you are ready to invest again, keep in mind - you don't need to invest it all at once. You might feel more comfortable investing $10k or so each month into a diversified portfolio of low cost mutual funds (with hopefully minimal to no transaction fees). This is called dollar cost averaging. It'll then work to your benefit if the market does drop as you'll be investing that portion at a lower cost.
Keep in mind, investing is for the long term. Just like the investments we make in our relationships, families, career and health, there will be good times and bad, but you can't let the tough times bring you down. There will always be something to get excited about (a natural disaster, war, recession, election year, etc.) but it's important to focus on what we CAN control, which is how much and where we invest. We can't control what the markets or the economy do. | 01.16.15 @ 21:48
Jenna, first things first... raising 2 little ones is NOT easy by any stretch of the imagination, let alone doing it while working. Well done!!
Now to your question...
Recommending how YOU should invest depends on a number of factors which can only be determined through a fairly comprehensive meeting. Having said that, if I only had the info you presented above, I'd say you're probably a great candidate for an indexed strategy.
Have a great day! | 01.17.15 @ 02:11
With a professional, it's cheaper then doing it yourself. You pay a marginal fee to have someone that breaths, eats and sleeps doing this, rather then risking your hard earned money. | 03.04.15 @ 00:21
That can only be determined through a consultation, but it does at least sound like you are risk adverse so your investment program should provide some form of defense along with the offense. | 02.09.16 @ 15:36
The most important thing in investing is Rule #1- Don't lose money. The 2nd Rule is-Refer to Rule #1.
An SEP IRA is a good start- For 2015 ,you can put the smaller of $53,000 or 25% of your taxable compensation.
Is this a self-directed SEP? You can manage this yourself or we can manage it for you. Your choice.
What is your MARR- Minimum Acceptable Rate of Return?
Be rational and invest in what you understand and always do an intrinsic value calculation with a MOS (Margin Of Safety) before you purchase any stock. If your looking at Index ETFs, etc. there are other methods like FACs (Floors & Ceilings), etc. Whatever you invest in, use a checklist and have the discipline to follow it. Lastly, determine your exit strategy before you purchase and do not change it unless your investment thesis changes.
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It's not what you make, It's what you keep that determines your lifestyle.
| 04.14.16 @ 00:30